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Maybe Rob Wells doesn’t really get the idea of cannibalism. I don’t agree with him on this, because streaming has hurt the one-track sales and the buying habits of the consumer. We see that in a reflection of the dropping sales in the iTunes marketplace and other content providers that have dwindling sales. In the November 2013 MIT Sloan Management Review, Wells explains that he does a lot through charts to get people on his side and a lot of the senior staff at the label seem to be less tech savvy, so it is hard to convince and persuade the senior level staff.

Well used the example that he had to introduce senior level executives to Snapchat and Vine. He could tell if they were interested if they were engaged in the conversation, if not they would ignore him all together. This seems very frustrating, time consuming, and ineffective.

Wells needed to educate the workforce at UMG about digital strategies and tools. The former CEO at UMG, Doug Morris, believed in the traditional ways of the classic music industry and was reluctant to implement digital strategies. It seems as though the music industry is hesitant to make a move on implementing new ideas and platforms that are made up in house, yet Wells states in the interview that UMG has never turned down any deals from outside parties, however they have a “how about this” approach. Wells made it seem like he was always fighting to get his point across and make things happen on the digital side, however when second parties came along the label never said no, for example, the Nokia deal. Nokia brought and pitched their idea to UMG, to this day that platform is alive and well in China.

Wells said when dealing with the music industry you have to get people on board slowly. You have to prove the value of the deal, when you prove what and how it can change the industry on a day-to-day basis. Wells stated that charts are the best way to do things in the music industry, they show factual information and there is no questioning that. The challenge is presenting a new concept or service to senior management. He states that the risk is the fear of buying the machine, going to the service, and dragging down more of the value then we paid. Wells explained the unlimited music service becomes the bell curve that the consumer tries to download as much as they can at the beginning stages of the subscription, while at the half way point they seem to get bored and the downloads die down. At the very end stage of the consumer’s music subscription they download as much as possible, because the subscription service is about to end.

They made it seem like he was dated and could not bring anything else to the table. If you look closer, it seems as though he was frustrated, because he was trying to get people to see is point of view everyday.

At the present state, streaming isn’t sustainable and has not been profitable. The major labels that exist have deals that have been lopsided and are in favor of the larger artists and not the independent. The Black Keys were the latest to leave Spotify, because of the so-called “cannibalism.” The labels have more to gain from Spotify than the artists. UMG has a stake in Spotify and receive upfront licensing fees. Patrick Carney of the Black Keys stated, “There’s a lot of stuff about some of these services that people don’t really know, it’s set up to be little more fair for the labels than it is for the artists, and that’s why we made that decision.”

The only way that streaming will not be in the lines of cannibalism, is when the business model is changed with content limitations, release limitations, and when higher streaming payouts for artists are implemented. Then streaming may have a true chance at sustainability and making a profit. Until then, it’s a rough road for all parties involved. A UMG insider said, “It’s time to figure out how to drive up the value of our content.” Instead of getting pennies to the dollar, UMG needs to look at media perspectives in a broader view and within a platform. The music industry must be more innovative and creative to find alternative distribution platforms in a way that appeals to consumers wants and needs in a more convenient fashion. After looking at the big picture, Lucian Grainge explained that ad supported subscriptions weren’t working for anyone, but streaming services and music fans. This would make perfect sense that Rob Wells was fired for supporting Spotify and their freemium models. Well’s believed the freemium models would help, he stated, “The argument that streaming harms records sales is absolutely bogus.“ He didn’t leave out of frustration; he was fired because he was a firm believer in streaming, which hasn’t had a sustainable and profitable model to date. Even though he was fired for his thoughts and misconceptions, Well’s interview at the 2013 MIT Sloan Management Review is still proof that the music industry is very hesitant and resistant to adapt and innovate new technologies, digital platforms, and strategies. I guess Grainge agrees with my views on streaming services and freemium is dead in 2015, just as I predicted in my beginning of the year predictions.

pix11.com – NEW YORK (PIX11) – Robin Thicke and Pharrell Williams crossed legal lines, according to a California jury, which found their song “Blurred Lines” ripped of the Marvin Gaye Classic, “Got to Give it Up.”

Williams and Thicke were ordered to pay $7.4 million to Gaye’s estate. But the chart topper “Blurred Lines” follows in a tradition of hit songs that seem to be heavily inspired by past musicians.

Many said Sam Smith’s “Stay with Me,” sounded eerily similar to Tom Petty’s “I Won’t Back Down.” Vanilla Ice’s “Ice, Ice, Baby,” reminded listeners of Queen and David Bowie’s “Under Pressure,” and Mark Ronson’s current single, “Uptown Funk,” has drawn comparisons the style of Prince.

PIX11 News recently visited the famous Quad Studios in Manhattan to ask music industry insider Alaska Gedeon if the “Blurred Lines” ruling would ruin the music industry, or if the next hit song might be stifled because an artist is afraid of a potential lawsuit.

The comparisons between “Blurred Lines” and “Got to Give it Up” were appropriate, Gedeon believes. “The first time I heard the record, I was kind of like, yo, that’s Marvin Gaye,” he said.

Gedeon believes artists often draw inspiration from classics, especially once they get focused in the recording studio. Typically, then record labels step in before music is released to make sure no copyrights are infringed upon. Gedeon says the producers of “Blurred Lines” may have been excited and let the song slip through the cracks, “it was a great record, everybody was just feeling it.”

“Once you hit play you forget everything when you have a great record.”

For future artists, Gedeon believes “Blurred Lines” will be a $7.4 million wakeup call, “at the end of the day you have to know where the music comes from,” he said.

A renewed focus on the value of music comes as a transition point for the record business. Rob Wells, Universal Music Group’s president of digital who brokered deals with “freemium” services like Spotify, left the company in late February. Now the company is rethinking the value of unlimited free streaming, according to a label source. At the same time, Apple’s upcoming subscription service, slated for a June launch according to an industry source and media reports, will forego the freemium model for a paid-only approach. It’s an approach Beats Music co-founder Jimmy Iovine, an executive at Apple since the acquisition of Beats Electronics, has consistently favored.

Negotiatons for Apple’s upcoming subscription service are evidence labels are standing firm on pricing. Industry sources say Apple has backed down from its effort to lower monthly pricing for its subscription service to $7.99 from $9.99. Apple would have to absorb the loss if it sets a price lower than the standard $9.99.

Few specifics about Apple’s subscription service are known at this time. It is widely believed that Apple will replace the Beats Music name with the iTunes brand. Label insiders say Apple has not revealed features or given demos. There is no indication if Apple will integrate iTunes Radio with a subscription service. But these insiders believe Apple is confident it can create a service that stands out from competitors and delivers enough value that consumers will pay the full price.

Apple is said to be talking to labels and artists about exclusives for its upcoming subscription service. An industry source dismisses rumors that Apple will be able to outmaneuver and outbid its competitors on exclusives for most key releases. “Apple is one of the biggest companies in the world. If they want exclusive content, they’re going to have to get out the checkbook.”

The music industry eagerly awaits Apple’s reboot of Beats Music, and the timing couldn’t be more perfect. The showdown between Apple’s pay-only business model and Spotify’s freemium model could change how people think about using free music to get paid music.

Industry sentiment about free music is years in the making. The previous decade was marked by brutal declines in revenue that reshaped companies — and the entire structure of the music business. iTunes provided a helpful transition to digital formats. Fives years later, services like Spotify won labels’ over, with a pitch to both generate revenue and reduce piracy. Now there are dozens of other streaming services with licensed content.

There has been a frenzy of licensing activity as labels became more flexible in their terms with digital services. “The last two or three years has been about stopping the [sales] decline and creating as many platforms and as many services and opportunities to capture money,” Universal Music Group chief Lucian Grainge said last year at a Wall Street Journal conference.

Now the smoke is clearing and different attitudes are forming. Some labels feel Spotify should have more than 15 million subscribers, sources tell Billboard. Apple’s pay-only service could be a turning point. If Apple is successful in attracting large numbers of subscribers without unlimited, or at least significant, free listening, Spotify’s business model could fall under more scrutiny. “Spotify is good at giving it away for free, but it’s bad at getting people to pay for it,” says an industry source.

The complaints from artists have grown louder. Artists have been vocal about streaming services’ royalties and the lack of transparency in the licensing terms. The freemium model itself has come under fire. Taylor Swift and Bjork have recently expressed their unwillingness to make music available to a subscription service’s ad-supported tier. “This streaming thing just does not feel right. I don’t know why, but it just seems insane,” Bjork told Fast Company last month.

Prompted by the public sparring between Taylor Swift and Spotify, Warner Music Group CEO Stephen Cooper brought up the topic in an earnings call in December. He voiced support for ad-supported streaming but warned that services with a “freemium” model — the object of Swift’s scorn — must clearly differentiate the benefits of the paid and ad-supported tiers.

Spotify has long taken the positioon it ad-supported tier is an effective way to acquire customers. Four in five subscribers comes from the ad-supported service, says Jonathan Prince, Spotify’s global head of communications and public policy.

Indeed, Spotify’s freemium approach has allowed the company to scale far better than its competitors. Second place Deezer’s 6 million subscribers and 16 million monthly listeners are well behind Spotify’s 15 million and 60 million, respectively. Rhapsody, which has a paid-only model, reached 2.5 million subscriber last month.

Prince also argues Spotify brings in consumers who hadn’t previously paid for music. As for the worry that Spotify is eating into download sales, Prince says Spotify’s internal research shows only 12% of former iTunes users use Spotify. “We’re on the same page as the labels in wanting to rebuild the music industry,” he says.

One option is to implement listening caps. Spotify had listening caps in place in Europe until January 2014 and had various restrictions in place in various countries. (For example, until March 2013 free users in the U.K. could play an individual song up to 5 times.) Sources say labels believe listening caps would help differentiate between free and paid services.

But labels are also realistic about the need to provide a free service. “People don’t think you can just turn it off,” says a label source. As Cooper said in December, a free tier can be an effective conduit to subscriptions. And free streaming has undoubtedly helped reduce the number of people that turn to illegal channels. There is ample research — some by Spotify — that shows music piracy has declined in many countries.

There’s also an element of geopolitics at play. A weakened Spotify could help create a more powerful Apple subscription service. That would remove the comfortable, valuable counterweight to Apple that labels don’t have in the digital download space. There’s even some doubt that Apple is out to beat Spotify rather than grow the music subscription marketplace. “If they’re out to kill Spotify, it’s news to us,” says an industry source. “And it’s the last thing we want. We want Spotify to be a strong competitor.”

Earlier this month, I reached out to musicians who had joined Music Xray but who had never used the site. I asked them if at the time they signed-up we had been able to show them a video like this, would that have been more compelling.

The feedback and response was fantastic and some users expressed their reasons they hadn’t yet tried Music Xray. There were a few common themes so I thought I’d address those. I’m sure there are others out there who have these same concerns but haven’t told us.

The music business has been screwed up for a hopelessly long time, but change is afoot: Congress, courts and the Justice Department are all poised in coming months to shake up how companies and consumers pay for music. The big question, though, is whether this flurry of activity will produce a rational royalty system — or just make the existing rathole even deeper.

Here’s what to watch for in a year that could change the rules of the game for performers, Pandora and everyone else with a stake in music.

The last month has seen the return of two proposed bills in Congress. One is the Local Radio Freedom Act, which would ensure that traditional AM/FM stations don’t have to start paying performance royalties on top of the songwriter fees they currently pay. The other is called the Songwriter Equity Act, which would tweak the way so-called “rate courts” calculate how much people who write songs should get paid.

Both bills have appeared before in one guise or another, but never passed. This time, the outcome will be determined in part by whether Congress takes up the issues at stake on its own, or as part of a larger royalty reform effort.

Meanwhile, industry attention is turning to the Justice Department, which is holding a hearing on March 10 over so-called consent decrees. These are antitrust orders that apply to ASCAP and BMI, two giant outfits that license songs on behalf of music publishers, and require them to license song rights at a fixed price to all comers. The antitrust orders have been to a boon to everyone from cover bands to bars to radio stations because they provide an easy, efficient way to clear copyrights. But music publishers say they are getting short-changed and want the orders, which date from the 1940’s, to be changed or abolished outright.

Finally, some high stakes court cases increase the chances this will be a year of reckoning for the music industry.

Digital on trial

The most contentious of these cases involve an aggressive series of class action lawsuits, brought by record labels and former members of the band The Turtles. In courts from California to New York to Florida, the labels are claiming that Pandora, Sirius-XM and other digital music services have failed to pay for performances that date from prior to 1972.

The legal theory appears far-fetched, but it’s gained traction before some judges. If the cases go any further, they will have huge financial and legal implications not just for Pandora, but for any other service that plays old music on the internet. (The labels also pushed the issue last year through a proposed law, The Respect Act; look for that bill to return if the labels strike out in court).

And, if all that’s not enough to keep track of, there’s also a court clash between Pandora and BMI. This one is about royalty rates, but also about whether publishers who use BMI to license their songs can pull the digital portion of their catalogues or if they must instead be, in the words of one judge, “all in or all out.”

A ruling in favor of BMI could cripple digital radio services, but that appears unlikely given that ASCAP lost a similar case last year.

What the fight’s really all about

All of these disputes are bitter and complicated, but the source of them can be summed up in a sentence: the music royalty pie has shrunk significantly, and what’s left of it is being distributed unequally. As an RIAA report in 2013 revealed, digital sales may be growing, but not fast enough to offset the long-term loss of CD sales. Professor Peter Tschmuck, as part of an analysis of the U.S. music industry, put the RIAA’s data into a chart last year:

These larger forces are why many of the measures now floating around — the songwriter law, the consent decrees, the court cases — won’t do much to change the game. Such piecemeal fixes also do little to acknowledge the current royalty system is broken because it’s built on assumptions of the analog era.

The proper way to approach the problem is instead to require the music industry to recalibrate the entire copyright collection process from the ground up and, especially, to fix two major imbalances in how money is collected and paid. The first imbalance involves a seemingly irrational distinction in how the law treats AM/FM stations and digital radio.

Pandora, for instance, is a favorite punching bag of the industry, but the company also spends the bulk of its revenue paying performers — even as traditional radio stations pay nothing at all. The reason for this, Washington insiders suggest, is that members of Congress are eager to make nice with local stations on which they rely heavily during election campaigns. This is why they are happy to let them pay nothing to performers, while at the same time throwing the likes of Pandora and Sirius-XM under the bus when it comes to royalty rates. But for musicians and for consumers, there’s really no reason why digital and AM/FM should be treated so differently.

The other big imbalance when it comes to royalties is between songwriters and performers. Many people will be surprised to know that when performers do get paid, which is the case when a song is played on digital radio, the rates can be up to ten times higher than what the songwriters (and their publishers) get.

The reason for the imbalance in this case, though, is the consent decrees that set the rates at which publishers get paid. The Justice Department could address this by lifting the decrees, and allowing publishers through ASCAP and BMI to charge what they like. But this could lead songwriter rates to go through the roof, and fatally wound digital radio services once and for all (recall Pandora is already on the ropes). It would also create new licensing headaches for restaurants, bars and other places that play music.

That’s why any solution that looks to pay songwriters more will also have to consider when it is appropriate to pay record labels, which represent the performers, less.

As for the dispute over pre-1972 recordings, the court cases (and the now-dormant Respect Act) appear to be no more than a cash grab through copyright expansion. Judges and law-makers should blanche at the idea of handing out windfalls, at the expense of consumers, for music that is already 50 years old. Such a gift would be a boondoggle akin to ethanol subsidies or the Bridge to Nowhere.

Change is coming.. but for better or worse?

All of this comes at a time when musicians are having a harder time than ever. The record industry that once nurtured them has shrunk dramatically, CD sales are drying up rapidly, and internet royalties are not making up the difference. But on the bright side, the internet has introduced new efficiencies that make it easier to track song sales and distribute payments (which helps explain ASCAP’s surprising $1 billion year.)

A solution from courts or Congress is in order. The danger, though, is that a partial solution will protect parochial interests such as FM stations or labels that own 1960’s recordings without creating a sustainable system for royalties in the digital age. There’s also a risk that changes to the law will simply scapegoat companies like Pandora and Spotify, which represent the future of music, or even kill them off altogether.

In any event, watch closely. This is the year that a lot of long-time log-jams in the music industry appear set to move.

Washington, DC — Songwriters and publishers have applauded the March 4 initiative by a bi-partisan group of members of US Congress to introduce the Songwriter Equity Act that would “allow songwriters to receive compensation based on the fair market value of their songs.”

The bill – which was first proposed in May 2014 – aims at modernising sections 114 and 115 of the US Copyright Act. and, according to their sponsors, “would amend federal law to allow songwriters to receive market-based compensation and would remove government price controls.”